Since the Spring of 2003, the US dollar has lost over one third of its value.

This year alone the dollar has fallen by over nine per cent against other major currencies.

While a declining dollar has been hailed by many American commentators as a solution to the growing US trade deficit, America's trading partners complain that they are having to pay for America's own economic shortcomings. As the dollar falls most heavily against the euro, for example, it makes US exports significantly cheaper compared to euro exports.

Speaking before the US Congress in early November, Nicolas Sarkozy, the French president, warned: "The dollar cannot remain 'someone else's problem.' If we are not careful, monetary disarray could morph into economic war. We would all be its victims."

But the most dramatic evidence of the dollar losing its currency reserve status is in the Middle East. Some Opec nations are even pressing to change the pricing of oil out of dollars.

How long before the USD becomes just another currency...not the predominate currency of the world as it is now?

And exactly who says it is the predominate currency of the world as it is now?

reserve currency (or anchor currency) is a currency which is held in significant quantities by many governments and institutions as part of their foreign exchange reserves. It also tends to be the international pricing currency for products traded on a global market, such as oil, gold, etc.

This permits the issuing country to purchase the commodities at a marginally cheaper rate than other nations, which must exchange their currency with each purchase and pay a transaction cost. (For major currencies, this transaction cost is negligible with respect to the price of the commodity.) It also permits the government issuing the currency to borrow money at a better rate, as there will always be a larger market for that currency than others.

The United States dollar is the most important reserve currency in the world today. Throughout the last decade, an average of two thirds of the total allocated foreign exchange reserves of countries have been in U.S. dollars. For this reason, the U.S. dollar is said to have "reserve-currency status", making it somewhat easier for the United States to run higher trade deficits with greatly postponed economic impact (see currency crisis). Central bank reserves held in dollar-denominated debt, however, are relatively small compared to private holdings of such debt. If foreign holders of dollar-denominated assets decided to shift holdings to assets denominated in other currencies, there could be serious consequences for the U.S. economy. Changes in the structure of the international financial system, however, typically occur only gradually. Thus, a large, sudden shift away from dollar reserve holdings is unlikely.

How long before the USD becomes just another currency...not the predominate currency of the world as it is now?

As the currency devolves...so does the country...?

Together, China and Japan own 40% ($1.9 trillion) of total World international reserves ($5 trillion). The U.S. share is just 1%. Additionally, the USA has tremendous international debts exceeding $10 trillion to more than cancel out its mere $69 billion in international reserves, whereas Japan has zilch international debt.

...Many other productive nations now have 31 times more foreign reserves backing up each of their children than we have backing ours, and their lead is increasing as the U.S. continues with massive trade deficits and record high internal private sector debt ratios, with nil savings. With 5% of the world's population, America consumes over 20% of world imports.

The U.S. is the world's largest debtor, a long fall from being the world's largest creditor when I was a young worker...
For most of the 20th century the U.S. 'wrote' most of the rules for world trade. No longer.
For a long time the U.S. dollar was unchallenged as the world's reserve currency. No Longer

Warren Buffett (2003 article in Fortune) tells the story of two fictional islands, Thriftville and Squanderville. In Squanderville, the residents live beyond their means by importing from Thriftville in return for IOUs. Eventually, Thriftville converts this debt into Squanderville assets until Thriftville owns all of Squanderville. America, Buffett warned, was facing the same fate as Squanderville. "Our trade deficit has greatly worsened, to the point that our country's 'net worth,' so to speak, is now being transferred abroad at an alarming rate.

TWO-THIRDS OF AMERICANS ARE NOT PREPARED FOR THE GLOBAL ECONOMY."

Like it or not, there are a billion talented workers coming on board the global economy who will do the most sophisticated software jobs amidst lousy environmental conditions in Indonesia, India or China. That's a reality we have to deal with. I hope we can keep our social safety net largely intact and still compete with a billion new workers. But I've got to tell you. I find myself intellectually on the side of the prime minister of Malaysia when he says 'you've had yours. Now it's our turn to have ours.

...Stated more simply - - our children owe foreigners $1.2 trillion which we citizens consumed in the last 20+ years in excess to that which we produced ourselves...The U.S. is now the World's largest debtor nation, compared to being the largest creditor in my generation - which means foreigners now own increasingly more U.S. assets than Americans own overseas. If not reversed, this trend looking forward spells dangerous challenges to the U.S. dollar, as the 'king' of world reserve currencies - and to American living standards.

...Foreigners now own more and more of America - - about "$8 trillion of U.S. financial assets, including 13% of all stocks and 24% of corporate bonds", according to Bridgewater Associates. According to the above chart, they also own 44% of all Treasury bonds. Additionally, they own real estate and factories.

We should not be mad at foreign interests. We are the ones consuming beyond our own production, creating unprecedented debts and trade deficits PLUS excessive federal spending. We are in deep trouble.

WHO IS WRITING THE RULES FOR TOMORROW'S WORLD TRADING SYSTEM - the U.S. or others?
In 'The Future of Capitalism,' 1996, author and M.I.T. economics professor Lester Thurow wrote:

"The rules for the new world order are being written in Brussels. The Common Market is now the world's largest market, and those who control the conditions of entry into the largest market have always written the rules for world trade. England did so in the 19th century, replaced by the U.S. in the 20th century. To some extent the European Union will write the rules for world trade simply because it is the only international group in the rules-writing business. It will write rules for those inside the EU and tell those outside how they can gain entry. Whatever it writes for outsiders will be copied by others as their rules governing outsiders."

This statement shows our young generation face a major challenge regarding 'who is in command of world trade,' compared to prior generations.

The US dollar declined 80% vs. the Euro 2001-2008, and also down against many others incl. 33% vs. the Canadian dollar. Regardless of the impact of U.S. stock, bond, real estate or commodity markets in the end most Americans think of their assets in terms of dollars, yet few recognize that a huge international depreciation (write-down) of those assets and the international value of their earnings is again in progress - - and there is little most know what to do to protect themselves. Just think, for every 100 thousand dollars of a citizen's assets the international buying power dropped $80,000 since 2001 vs. the Euro. Not only does that wipe-out incentive for foreigners to invest in dollar assets to help finance America's savings-short, deficit economy, it negatively impacts the store of value of U.S. citizen savings and effectively causes a huge decrease in the international value of U.S. wages.

Foreign interests have more control over the US economy than Americans, leaving the country in a state that is financially imprudent. More and more of our debt is held by foreign countries – some of which are our allies and some are not. The huge holdings of American government debt by countries such as China and Saudi Arabia could leave a powerful financial weapon in the hands of countries that may be hostile to US corporate and diplomatic interests.”

...Stated more simply - - our children owe foreigners $1.2 trillion which we citizens consumed in the last 20+ years in excess to that which we produced ourselves...The U.S. is now the World's largest debtor nation, compared to being the largest creditor in my generation - which means foreigners now own increasingly more U.S. assets than Americans own overseas.

the EU and the banks there can call the US. "What do YOU have backing your dollar? Nothiing, huh? Well lookiewhat WE have."

And that's just it. With uncontested military power, the US and the USD will always have the upperhand

Exchange rates against the Greenback do fluctuate over time and is not necessarily an accurate barometer. In the early 1970s, the C$ enjoyed an even higher exchange rate and yet the US was not worse off back then

And that's just it. With uncontested military power, the US and the USD will always have the upperhand.

My point is, as long as the USD is a petrodollar and the US has the military means to defend it, it will remain as the world's reserve currency.

Symbiotic relationship